Tuesday, September 30, 2008

Chester Greenwood (1858–1937) was an inventor and pioneer in the use of steel in a variety of products, most famously his Greenwood's Champion Ear Protectors.

A native of Farmington, Maine, a young Greenwood had been dissatisfied with the bitter winter cold that froze his ears. The old method of wrapping an itchy wool scarf around one's ears was bulky and cumbersome. The fifteen-year-old Greenwood used coiled steel and had his grandmother sew on fur, thereby creating the world's first ear muffs. A few years later he patented an improved version and went into business. Eventually, he designed and built a factory that manufactured 400,000 pairs of earmuffs annually.

After his success at earmuffs, he went on to patent over 130 other useful products, including a steel-toothed rake, a wide-bottom tea kettle, a mechanical mousetrap, a spark-plug improvement, a shock-absorber (which became the basis of modern aircraft landing gear), and many others.

Monday, September 29, 2008

Today we honor Frank Lloyd Wright (1867-1959) for his achievements in design and architecture.

Born in Wisconsin, Wright's formal education extended just two college semesters beyond high school. After leaving the University of Wisconsin in 1887, Wright moved to Chicago where he joined the Architectural firm Adler & Sullivan as an apprentice. The Great Chicago Fire of 1871 had left the city nearly in ruins, and plenty of work for the firm and Frank.

Frank's creativity soon moved beyond that of Adler & Sullivan. He began working for private commission - behind the backs of his employer - to implement design ideas of his own. After losing his job with the firm, Wright opened a private business from his home designing houses. It is in this time that Wright designed many of the houses in Oak Park, Illinois.

Over his career, Frank's designs ranged from houses to schools to museums. His most familiar design is that of the "prairie" house - of horizontal lines. Today, his work can be seen in both the city and country - e.g. the Guggenheim Museum in New York City, and FallingWater near OhioPyle, Pennsylvania.

Thanks to Frank's pursuit of personal interest, we are all better off.

Thursday, September 25, 2008

Today we honor John Deere for his invention of his self-scouring steel plow.

John Deere (1804-1886) developed a new plow that allowed farmers in Illinois to till tough clay-like soil. When he left his family to seek his fortune, he quickly learned that new pioneers were struggling with the tough soil of the "West" (ie: OH, IL, IN, KS, MO). Basically, the clay-like soil made farmers have to stop to clean the plow every few steps. Needless to say, this was not very productive. Deere soon discovered a way to battle the tough soil. The trick was to have highly polished steel and a moldboard with a new shape (picture above). The superior plow contributed to the increased food production of that time. Of course, he is largely remembered ad the founder of the agricultural machine producing giant that bears his name, but it all started as a simple blacksmith trying to find a better way to serve his customers. Click here for the long version of how he invented the plow.

Wednesday, September 24, 2008

Last week I lost the benefits of Nikola Tesla's invention for four long days and so would like to honor Tesla (1856-1943), the father of alternating current (AC) electricity.

Born in Croatia, Tesla immigrated to the US in 1884 working as a physicist. Tesla worked briefly with Thomas Edison at Edison Machine Works, but left shortly after to pursue his own inventions.

Tesla designed a system of generating and transmitting alternating current (AC) electricity, effectively replacing direct current (DC) electricity as a way to supply electricity to homes and businesses. In 1888, George Westinghouse bought the patent rights to Tesla's invention.

AC electricity lessened the amount of heat used in electricity and was more efficient. AC is still the form of electricity used today to transport electricity to homes and businesses.

During his life, Tesla had over 700 inventions and 100 patents. Tesla, thank you for your invention, I hope I don't lose access to it again anytime soon. I am certainly richer and happier for AC electricity.

Sam Walton began with a single store, and concentrated on building a better mousetrap in the retail industry. He stayed open later, bought from the lowest-cost suppliers and consequently offered lower prices. This, of course, brought in customers. This increased volume allowed Walton to negotiate even lower prices, and his empire began to grow. He used ideas like volume discounting, extended hours and self-service to streamline the retail process and provide goods at a lower cost than his rivals.

This commitment to discounting allowed Walton some early success, but other retailers followed similar strategies in the 1960’s, and Walton was at that time, just one of many discount retailers. Walton remained committed to the idea of discounting and providing goods at a lower cost than any competitor and this focus led him to many innovations.

Walton was one of the first retailers to embrace computerization. It was this dedication to efficiency through access to information that led to Wal-Mart’s use of an innovation that is now known as “Just-in-Time” inventory control. The idea behind Just-in-Time inventory control is that by providing goods to a store immediately as the need arises, inventory costs can be lowered dramatically. This, of course, requires a great deal of information, but Walton’s early commitment to computerization made accessing this level of information possible. Walton’s strategy of centralizing his store locations between communities and providing a single large store, rather than several smaller ones also allowed him to access lower costs and consequently provide lower prices.

Sam Walton’s desire for innovative ways to cut costs remains in place at Wal-Mart even after his death. Starting in 2005, Wal-Mart began using suppliers who were willing to incorporate radio-frequency identification (RFID) tags into their shipping containers. These RFID tags emit a signal that can be scanned by and inventory management system. This technology allows inventory management to become even more streamlined, lowering costs even further. RFID tags have quickly become standard practice for all large retailers because of the incredible savings they provide.

Recent events have placed Wal-Marts labor practice under scrutiny. But to those who look to criticize Sam Walton’s labor practices, he is also credited with being an early provider of profit sharing, stock options and employee discounts.

Walton’s approach is not beloved by all (see above), but its success cannot be denied. Walton was named the richest man in the U.S. from 1985 to 1988. And nothing signals success like imitation. Retail giants like Home Depot, Barnes & Noble, Blockbuster and Target have built their empires following many of the ideas and innovations of Walton and Wal-Mart.

Many studies have been undertaken to attempt to determine whether or not the presence of a Wal-Mart means an increase or decrease in employment or an increase or decrease in small business opportunities, with varied conclusions being drawn. But one thing that cannot be denied is that Wal-Mart has brought lower prices to a large portion of the country, and Walton’s business practices have become standard practice in many other companies in many other industries, which only expands his influence. Simply understanding that people want lower prices and finding innovative ways to provide them made Sam Walton a Hero of Capitalism.

Monday, September 22, 2008

James Buchanan Duke (1856–1925) is a hero of capitalism who revolutionized the manufacturing, distribution, marketing, and sales of consumer products. Duke specialized in tobacco, but his innovations spread throughout dozens of other industries, making consumer products cheaper and more available around the world.

Duke began his career as a small tobacco farmer and distributor with his father and brother in Durham, North Carolina. In the 1870s, most tobacco in the United States came in the form of snuff, pipe tobacco, chewing tobacco, and cigars. Although cigarettes had been an available form of consuming tobacco for many years, the slow hand rolling process and need for special leaf blends made them not widely available.

In the 1880s, Duke decided to switch his company's production from varied tobacco products to cigarettes. Using the local "bright leaf" tobacco that had been popular with Civil War soldiers, he sought a means of reducing the expense and time required to make cigarettes. Although he had enticed many skilled laborers to relocate from New York to Durham, he eventually found the breakthrough he needed in James Albert Bonsack.

Bonsack had invented a mechanical cigarette rolling-machine. Duke bought Bonsack's machines and began working with him to improve them. Initially, the machines could make 70,000 cigarettes per day (compared to 3,000 per day for an average skilled laborer), but after the improvements, they could put out 120,000 per day.

With secure, cheap production in place, Duke rapidly expanded his business and made cigarettes popular throughout the country and throughout the world. By 1890, Duke's American Tobacco Company could make over 800 million cigarettes per year. A decade later, the company had been vertically integrated to include everything from tobacco farms, curing, warehousing, production of cigarettes, purchasing, packaging, distribution, and sales. The company made over 3.78 billion cigarettes per year.

American Tobacco not only revolutionized cigarette production, but was also responsible for introducing the first baseball cards, helping to create the concept of branded merchandise, and using middle management to coordinate sales and production. Duke's own later accomplishments included helping his brother co-found Duke Power (now Duke Energy) and endowing Duke University.

Friday, September 19, 2008

Today we pay tribute to Soichiro Honda (1906-1991) for his contribution to the world's auto industry.

Honda left school in 1922 at age 15 to pursue a career in auto-mechanics. As an apprentice, he learned the ins and outs of the gasoline engine. As a professional, he honed his skills with precision, refining piston action to produce a higher quality, higher performance engine.

After retiring from mechanics, Honda started the Honda Motor Co. in 1948. He first applied his efforts to motorcycle manufacturing, which proved extremely successful in the Japanese market. However, he realized little success with his first cars - introduced in 1957.

In the 1970s, Honda's cars swept the world market. Honda's innovative engines quickly toppled the "gas guzzlers" of the day. Cars like the Accord and Civic simply out-performed nearly everything Detroit had to offer. In 1982, Honda began manufacturing cars in the U.S. Honda Motors has since become an industry leader.

With little formal education, and a huge ambition, Honda's pursuit of self interest brought all of his dreams to fruition and made each of our lives better.

Thursday, September 18, 2008

Few inventors can predict, let alone control, the destiny of their creations. Many struggle to profit from their work even when the concept proves commercially successful. Antoine-Joseph "Adolphe" Sax couldn't have foreseen the musical trajectory of his most famous invention (and hardly did he profit from it). What was intended for orchestral music and military bands in the 1840s instead made itself at home in the world of jazz, playing a major role in that genre's progression in the early to mid 20th century.

Sax was born in 1814, the son of a Belgian instrument maker. He learned from his father the intricacies of instrument-making and became something of a clarinetist himself. After years of tinkering with existing horns, Sax designed a family of instruments, in two groups of seven (seven instruments suited for orchestral use and seven for band use) that would bridge the gap between woodwinds and brass instruments. While he succeeded in this technical goal, he had mixed luck promoting the instrument. Orchestras were set in their ways and did not want this new invention to disrupt their traditional line-ups. He faced legal maneuvers by instrument makers, a couple of bankruptcies, and even threats on his life. Luckily his instruments fared better with French military bands, but arguably the important point is that they survived long enough to play a leading role in the development of America's indigenous music.

There's no reason to believe that Sax had the goal of creating an icon of sensuality and soulful self-expression, but we can all be thankful for his role in opening a musical platform for the likes of Coltrane, Parker, Henderson, Rollins, and so many others.

Wednesday, September 17, 2008

Today we honor Eugène Schueller (20 March 1881 - 23 August 1957), founder of L'Oreal. As a young man, this French-German chemist used his skills to make hair dye for local hairdressers. Eventually he moved into other products. Today he is mostly remembered for his Nazi sympathies. Ultimately, his pursuit of personal profit developed into what is now known as the L'Oreal Group.

Today the L'Oreal Group still holds to Schueller's philosophy of "research and innovation in the interest of beauty." This international company had over 17 Billion Euros in sales in 2007 and employs thousands of people worldwide. All the wealth created by The L'Oreal Group is a direct result of Schueller's personal profit motive.

With all that said, this is the first somewhat controversial Hero we've honored. Can a Nazi supporter be a Hero of Capitalism? Can personal convictions trump capitalistic tendencies? I'll be sure to put my two cents on this in the comments, and I welcome the opinions of all the readers in the comments section as well.Schueller on WikiL'Oreal on WikiL'Oreal Group Website

Tuesday, September 16, 2008

Today we highlight Milton Bradley (1836-1911) as a hero of capitalism. Bradley helped bring the game board industry to North America with his invention of the board game The Checkered Game of Lifeand later formed the Milton Bradley Company.

Bradley originally taught himself lithography and print making with his best known work being a likeness of clean shaven Abraham Lincoln. However, once Lincoln grew his famous beard, Bradley's print making business struggled.

The young entrepreneur began to work on making an American board game similar to an imported game he had played with friends. This new game used a top that spun to indicate the number of squares to move, a first in American board games. Bradley was also the first to redefine the purpose of the board game. In his first game, The Checkered Game of Life, Bradley continued the tradition of using the game to impart moral advice to those playing, but he also defined success in the game by looking at how much wealth each player was able to create and obtain.

Bradley found success when he used his troubled business to print copies of this new game. Within two days, he sold all the copies he had printed and sold another 40,000 copies of the game in the first year alone.

With his invention of The Checkered Game of Life, Bradley also formed Milton Bradley Company, a successful game production company. Now owned by Hasbro, Inc, Milton Bradley and his company are responsible for other successful games like The Smashed-Up Locomotive, Candy Land, and Battleship.

The financial success Bradley enjoyed because of his invention allowed him to become an advocate for education, especially kindergarten.

Bradley's game board invention remained a success and was updated in 1960 to become The Game of Life. His emphasis on morals and the creation of wealth as well as his entrepreneurial spirit helped Bradley create a game millions of people have enjoyed playing and created the opportunity for Bradley to pursue his passion of reshaping education.

Monday, September 15, 2008

Billy Beane is the general manager of the Oakland Athletics whose exploits have been made famous through the Michael Lewis book “Moneyball.” The Moneyball story tells of a young, unorthodox general manager whose fresh approach to running a baseball team allowed his small market Oakland Athletics to remain competitive during a time when the gap between small market and big market teams was growing larger and more critical to the team’s prospects of success.

In baseball, teams that play in large media markets have an inherent structural advantage over those who play in smaller markets. Initially this difference manifested as higher attendance and more revenue from local broadcast deals. But as the economics of baseball grew, this difference became more pronounced, the owners tried to correct this problem through increased revenue sharing. Of course large market teams acted to protect their revenue streams, and consequently found even greater revenues available to them through innovations like luxury boxes and vertical integration into national television networks. Salaries continued to grow for players, and soon many of the smaller market teams found themselves priced out of the market for the established talent.

The Oakland Athletics are one such small market franchise. But rather than simply cutting costs and accepting losses, a culture of innovative and creative thinking began to emerge under general manager Sandy Alderson. Like a small company that streamlines and specializes to effectively compete with larger adversaries, the A’s looked to find competitive advantages that would allow them to compete for less. When Alderson left Oakland to work for the Commissioner of baseball, his young protégé Beane took over.

Beane began to base personnel decisions on rigorous statistical analysis. This analysis including using metrics which other teams have long ignored. Through the popularity of Moneyball, Beane has often been credited with “inventing” statistics like on-base percentage and OPS (a metric that combines a player’s ability to get on base with his ability to hit for power). But Beane did not invent these metrics; he simply recognized the need use them, allowing him to spend his limited resources more effectively.

Beane is a pioneer for using statistical analysis to recognize that an underpriced resource existed. He then exploited this market imperfection to construct several teams that competed on a fraction of the payrolls of large markets teams like those in New York, Boston and Los Angeles.

His approach has spread rapidly, both through its popularization via Moneyball, but also from the dissemination of his protégés to the front offices of many other teams. Beane’s Athletics have fallen on harder times in the last few years, as his advantage disappeared as the market corrected, but he continues to identify other underpriced (or overpriced) resources. Despite the recent lack of success on the field, Beane’s most recent strategy appears to be to trade pitchers who are approaching their free agent years for multiple prospects. This approach has loaded Oakland’s farm system with many high-ceiling prospects, and many talent scouts expect another period of success for this small market franchise in the near future.

Beane’s innovative approach has allowed many more small market teams to field competitive teams, at least in the short run, and has kept the interest level in baseball at a high level, despite the structural inequalities that many expected to ruin the sport.

Friday, September 12, 2008

Andrew Carnegie (1835–1919) created America's steel industry, leading it to world-wide prominence. His efforts at bringing technology and new business methods to the industry helped bring innovations to dozens of other areas of American life.

When Carnegie started in the iron industry, American producers trailed far behind Great Britain in their output. In the 1870s, British industrial output of pig iron was 5.9 million tons per year compared to only 1.8 million tons of American product (which was of such inferior quality that few railroads used it on their lines). Steel production showed an even wider gap. Britain produced 275,000 tons of steel ingot annually compared to America's paltry 37,500 tons per year.

Andrew Carnegie adopted the Bessemer Process for transforming iron into steel in a cheap, high-volume, and efficient manner. He began expanding from iron production to steel and used innovative business management techniques to expand his output and to improve his business. Carnegie eventually vertically integrated his business at the famous Edgar Thompson Works, which used a coordinated delivery system for coke and iron and massive new Bessemer converters to expand his output from 70 tons of steel per week in the 1870s to over 1,000 tons per week in the early 1890s.

Carnegie steel laid the foundation, literally, for modern America. His output included the steel for the Eads Bridge connecting Illinois and St. Louis, MO, across the Mississippi River. The Eads was the world's longest arch bridge at the time of its completion, and contemporary engineers and architects considered its used of steel for the arch to be daring and revolutionary. Opened in 1874, the bridge still stands today and carries vehicle and pedestrian traffic. After the success of the Eads bridge, John Roebling used Carnegie steel in his innovative Brooklyn Bridge. Carnegie's steel output can be found in dozens of skyscrapers and railroads still in use today. By the turn of the century, when Carnegie retired and sold his company to J. P. Morgan, American steel production, much of which came from the Carnegie Steel company, exceeded that of all producers in Great Britain and Germany combined.

Thursday, September 11, 2008

Today we honor Peter Goldmark (1906-1977) for his accomplishments in T.V. and recording technology.

Born in Hungary, Goldmark immigrated to America following the completion of his doctorate at the University of Vienna. As an engineer, Goldmark landed his first position in the U.S. at CBS Laboratories in New York, NY. Though he is responsible for developing the first color television technology, Goldmark is best known for his contribution to the music industry.

In 1948 Goldmark introduced the public to the long-playing (LP) record - otherwise known as the 33-1/3 vinyl. The LP made it possible to store up to 40 minutes of music and produced a better quality sound than anything prior. The LP "revolution"ized the music industry - so to speak - as Goldmark's invention hit the scene at the onset of - and largely aided - the "Rock n Roll" explosion. The LP proved an easier means of listening to, recording and marketing music of the day. As a result Goldmark's LP quickly became and remained the music industry's standard well into the 1980s.Rock on Peter Goldmark.

Wednesday, September 10, 2008

Unlike another Fred of transportation fame, Fred Jones wasn't born into an easy or comfortable life. His mother died when he was a child; his father dropped him off with a Cincinnati priest not long thereafter. Before he became a teenager, Jones ran away from the Church and began a life of learning-by-doing, seemingly using every odd job he held to master a new skill and solve problems. His most notable achievement, refrigeration units for trucks and trailers, led to dramatic changes in the way we shop, eat, and trade.

Jones got his start, fittingly, in a garage. Hired to clean the shop, he paid attention to the mechanics and became adept at rebuilding and enhancing autos himself. In his early life he would invent a snowmobile, a mobile x-ray machine, and an automated ticket dispenser. He mustered over 60 patents in his lifetime, but the majority of them had to do with refrigeration for transportation. With a business partner he co-founded Thermo King to market his invention. To this day the company is a major name in refrigerated vans and trucks.

In Jones' time refrigeration wasn't new and neither was the desire for refrigerated shipping. Refrigerator units had been placed in trucks and trailers before to no avail; vibration and inefficiency did them in. Legend has it that Jones' partner, Joe Numero, put him up to this task after a golf match in which refrigerated trucking was mentioned as desirable by one friend (in the trucking business) and unfeasible by another (in the refrigeration business). Numero had recalled an earlier discussion where Jones had mentioned his desire to invent air conditioning for cars. What Jones and Numero accomplished highlights the fact that successful entrepreneurism isn't the product of good ideas alone. It comes from an alignment of those ideas with tangible needs and many intangibles, including luck.

Tuesday, September 9, 2008

Arnold Beckman was a chemist who had a knack for finding better ways to measure. He is especially noted for his "acidmeter," which allowed precise measurement of PH levels. He is remembered for many inventions, but today we honor him for turning his consulting business into Beckman Instruments. Beckman Instruments started in 1950 after buying out another company. At that time, it employed about 450 people. In 2004, Beckman Coulter employed more than 10,000 people and raised revenues of $2.4 Billion.

Beckman's pursuit of personal profit led to a company that makes us all richer. Every time one of us has medical lab work done, chances are Beckman contributed to making that test better. His legacy at Beckman Coulter continues to improve the biomedical testing and diagnostic industry.

Monday, September 8, 2008

Frank J. Zamboni (1901-1988) was a successful business man, used to adapting business plans to fit changing times. In 1949, he did just that with his invention of the Ice Rink Resurfacing Machine, now commonly known as the Zamboni.

Zamboni, his brother, and his cousin owned an ice rink in Paramount, California. The men constructed a dome over the top of the rink to help protect it from the sun, but the ice still became chipped from regular use.

In order to make the ice smooth again, three to five workers were needed to scrape the top layer of the ice, sweep away the shavings, wash down the surface, mop the ice, and then spray a final coat of water on the ice. This process often took an hour and a half to complete. In 1942, Zamboni began work altering a tractor so that the tractor would scrape and smooth the ice faster and more efficiently. Seven years later, Zamboni patented his Ice Resurfacer.

This new invention allowed for the ice to be smoothed in 15 minutes. Zamboni continued to alter his machine and helped ice skating rise in popularity as it become easier and cheaper to keep the ice in pristine condition. His invention can be seen in hundreds of ice rinks today, and his original ice rink and factory remain vibrant businesses today.

Friday, September 5, 2008

The plan, at this early stage, is to use Fridays as a day to think outside the box and come up with some names that aren’t necessarily obvious for this site.

I’m a sports guy, so I’m going to use my first couple of posts to pay tribute to a few sports figures who, by thinking about the game in a different manner, advanced the game in some significant way.

My first hero is therefore Branch Rickey (1881-1965). Branch Rickey was a long-time baseball man who played briefly in the major leagues and managed for a little while longer, before graduating to the front office. As the business manager for the St. Louis Browns in the late 1920’s, Rickey is credited with inventing the system that is now known as the minor leagues, in which formerly independent teams affiliated themselves with a parent club from the major leagues.

But fans of baseball know that this is not why Branch Rickey is so famous. Rickey is best known for his time as the President and General Manager of the Brooklyn Dodgers. During this time, Rickey signed Jackie Robinson to be the first African-American player in the major leagues. Robinson debuted in 1947 and was named the Most Valuable Player of the league in 1949. In signing Robinson, Rickey revolutionized the labor market for major league baseball players. Robinson’s and the Dodgers' success prompted other teams to change their labor practices.

Credit has been given to Rickey for having an ideological motivation behind his integration of baseball. This may or may not be true, but what we do know is that, by taking this bold step, he proved himself to be a better manager than all of his peers. He identified an underutilized resource, the many talented players trapped in the Negro Leagues, and accessed the resource to improve his team. The Dodgers’ early success was noted by rival GMs and integration spread rapidly around the league. The teams that integrated the fastest outperformed those that delayed(1), and this success guaranteed full integration across all of baseball’s franchises. (The Boston Red Sox (1959) were the last to integrate)

Branch Rickey was an innovator. His innovations ranged from training methods and equipment to the minor leagues, to a revolution in the labor market for players. When Rickey finally left baseball in 1955, he left the game in radically better shape than he found it. Baseball is today a multi-billion dollar industry, and Rickey’s minor league system today consists approximately 245 teams in towns across the United States. Branch Rickey has often been identified as a hero for integrating baseball. But for all of his accomplishments, Branch Rickey should also be recognized as a Hero of Capitalism.

Thursday, September 4, 2008

Cornelius Vanderbilt (1794–1877) was one of America's first and most accomplished heroes of capitalism. Vanderbilt began life on a humble Staten Island farm and rose to be the wealthiest American at the time of his death.

Throughout his business life, Vanderbilt helped to transform American transportation networks and to provide a stable and cheap means of conducting business at a distance. Prior to the "transportation revolution," Americans faced a daunting task when they attempted to move from place to place in the vast territory of the United States. With only draft animals and primitive dirt roads or wind power and sailing vessels, nothing in the world could move faster than 20 miles per hour. The advent of steam power, in both watercraft and later railroads, broke through those old barriers and made possible the transportation of goods and people across great distances.

Vanderbilt's role in the adoption of steam power was a significant one. Facing a state-granted monopoly of steam navigation of New York waters, Vanderbilt and his partner Thomas Gibbons set out to smash the monopoly by proving that free competition and business acumen could provide the market with superior service. Working against the state enforced restrictions, Vanderbilt powered his boat the Bellona into New York harbor for six years in defiance of the state-protected monopoly. His mast carried a bold statement, "New Jersey Must be Free," indicating his opposition to the quasi-mercantilist regulations imposed by the state monopoly.

Eventually, Gibbons and Vanderbilt prevailed when the United States Supreme Court ruled in Gibbons v. Ogden (1824) that the federal commerce power prohibited states from imposing such monopolies of commerce.

The immediate result of the opening up of trade was a massive reduction in prices (anywhere between a reduction by half up to a reduction by ninety percent) and a growth in capacity. Almost overnight, western rivers and canals had hundred of steamboats carrying the products of newly established businesses to distant markets. Harper's Weekly observed "in every case of the establishment of opposition lines by Vanderbilt, there has been a permanent reduction in fares."

The ability to overcome the physical barriers to commerce generated a spur to industry across the United States. The superiority of open competition demonstrated by Vanderbilt would later facilitate the creation of a vast railroad system that further advanced American standards of living through improved transportation, with Vanderbilt himself at the forefront in his creation of the New York Central Railroad system. Vanderbilt as a railroad tycoon built Grand Central Station, where a statue of him still stands.

Wednesday, September 3, 2008

Harry Markowitz laid the foundation for the modern day study of finance. As a student of economics at the University of Chicago, Markowitz developed and published papers outlining the importance of diversification and risk analysis.

In 1952, Markowitz published a paper titled "Portfolio Selection."In this paper, Markowitz put forth the idea of diversifying a portfolio of stocks to produce optimal returns with respect to the level of risk involved.From this theory he developed the Markowitz Efficient Frontier – as it came to be called – which illustrates the set of portfolios that result in the greatest expected return per given level of risk.

Markowitz’ work in portfolio theory set the stage for further development in the study of finance and earned him a 1/3 stake in the Nobel Prize – alongside William Sharpe and Merton Miller.Markowitz’ theory- and extensions of his theory (e.g. the Capital Asset Pricing Model)- are still very relevant today – both in the classroom and on Wall Street.His ideas opened the door for an industry of financial specialists, analysts, and the like.

Tuesday, September 2, 2008

When Ann first told me of her idea for a blog celebrating the heroic entrepreneurs of capitalism, I immediately thought of Fred Smith. Most folks who aren't followers of the business world are unaware of Smith, but everyone knows and enjoys the fruits of what he started.

In 1973 Fred Smith's company, Federal Express, introduced overnight parcel delivery to the US. A hub and spoke logistics system, based in Memphis, commenced delivery operations to 25 cities. It took over two years for the company to start making money and it's a wonder Federal Express succeeded. 1973 saw the Arab oil embargo, long-standing and burdensome regulations in the airline and trucking industries, and Postal Service monopolies on mail boxes and letter deliveries. But good ideas die hard, and with over $80 million in venture capital and $4 million of Smith's inheritance from his father, Federal Express outlasted most of these challenges and inspired the rest of the delivery world to follow its lead.

And how different the world is today. What Fred Smith and Federal Express (now FedEx) unleashed was a logistics revolution, the results of which are ubiquitous in modern life. Anything from textbooks to electronics are available from hundreds of countries around the world, affordable to anyone who "absolutely, positively needs it overnight."

Fred Smith is doubly heroic because his position as a successful innovator gave him and his company clout to push for airline deregulation in 1978. On top of this acute achievement, Smith is an ardent free-trader and proponent of policies which make hospitable the environment for future entrepreneurs.

Monday, September 1, 2008

Today we honor Johannes Gutenberg (~1400-1468), the inventor of the wood and metal movable type printing presses (note:there is some recent controversy over whether Gutenberg actually invented the printing press). The printing press allowed Gutenberg to start mass-producing books, which until this printing press had been hand copied or printed on a movable clay press.

The Gutenberg's movable printing press (picture on our banner above) caused the price of books and printed material to drop dramatically. This allowed the transmission of knowledge to move at a much greater pace.

Though Gutenberg created vast amounts of wealth for others through cheap books, he died a relatively poor man. Ultimately, Gutenberg was not legally savvy and lost possession of certain printing rights, which was the beginning of a downward spiral. Gutenberg's legacy of pursuing personal profit made us all richer with the invention of wood and metal movable type printing presses.